System Software Associates, Inc., Roger Covey and Joseph Skadra

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

Litigation Release No. 16694 / September 8, 2000

SECURITIES AND EXCHANGE COMMISSION v. SYSTEM SOFTWARE ASSOCIATES, INC., ROGER COVEY and JOSEPH SKADRA, Civ. No. 00C 4240 (July 13, 2000, N.D. Ill.)

On August 25, 2000, the U.S. District Court for the Northern District of Illinois entered an Order permanently restraining and enjoining System Software Associates, Inc. ("SSA"), from violating or aiding and abetting violations of Section 17(a) of the Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. The Order provides all of the relief sought against defendant SSA in the Commission's complaint. Defendant SSA consented to the entry of the order without admitting or denying the allegations in the Complaint.

According to the allegations in the Commission's Complaint, SSA misstated its financial results during its fiscal years 1994 through 1996 by improperly reporting revenue on sales of a development-stage UNIX-language software product. The Complaint also alleged that, during 1995 and 1996, SSA recognized approximately $52 million in revenue from sales of its UNIX product that were subject to side letters or other material contingencies. According to the Complaint, SSA's fraudulent activities resulted in substantial losses to those public investors who purchased SSA stock during the period when the company's financial statements were misstated.

The remaining defendants, SSA's former Chief Executive Officer and Chairman of the Board, Roger Covey, and its former Chief Financial Officer, Joseph Skadra, have not entered into settlements with the Commission. Covey and Skadra are alleged in the complaint to have violated or aided and abetted violations by SSA of the anti-fraud and other provisions of the federal securities laws in connection with SSA's false financial statements. The Complaint seeks a Judgment of Permanent Injunction against Covey and Skadra as well as civil penalties and disgorgement of salary bonuses.